Record Final Results FYE 31 May 2012

RNS Number : 8631I
Allocate Software PLC
31 July 2012
 



31 July 2012

Allocate Software plc

("Allocate" or the "Company")

 

Record Final Results for the Year Ended 31 May 2012

 

Allocate Software plc (AIM: ALL), the leading provider of workforce and compliance optimisation solutions, announces its final audited results for the year ended 31 May 2012.

 

Financial Highlights

 

§ Revenue increased by 22% to £36.6m (2011: £30.1m)

§ Recurring revenue increased by 36% to £15.6m or 42% of total revenue (2011: £11.5m or 38% of total revenue)

§ Organic revenue growth was 10% in 2012

§ Healthcare revenue was £26.2m (2011: £23.1m)

§ Investment in R&D increased by £2.2m to £6.8m

§ EBITDA* increased by 10% to £6.4m (2011: £5.8m)

§ Diluted adjusted EPS** increased by 16% to 7.4p (2011: 6.4p)

§ Operating cash flows were £5.4m (2011: £5.9m). Net cash balance at the year-end was £4.3m (2011: £10.3m), primarily as a result of acquisitions made during the year

§ Directors are proposing a dividend of 1.2p per share in respect of the full financial year

 

*    EBITDA refers to earnings before interest, tax, depreciation, impairment, amortisation and share based payments and acquisition costs.

**    Diluted adjusted EPS excludes amortisation of intangible assets, impairment, acquisition costs and share-based payments, adjusted for taxation.

 

Business Highlights

§ Total Healthcare customers worldwide now number 365, including 262 NHS Trusts and 95 customers overseas.

§ HealthRoster gained 20 new NHS Trust customers in 2012, making 141 Trusts (after taking account of NHS Trust mergers) withHealthRoster in total at the year-end which represents 47% of 301 Acute, Mental Health and Primary Care Trusts in the United Kingdom.

§ The Zircadian business acquired in August has made very good progress, with a significant number of cross sell contracts secured within the Allocate customer base and also the integration of the Zircadian applications with the Allocate HealthRoster application.

§ Time Care in Sweden had another good year meeting management's expectations and growing its customer base by 22 new customers, versus 16 in 2011.

§ In Australia, a major development has been the integration of RosterOn, acquired in July 2011. The principal component of the RosterOn product, the awards management engine, has now been integrated with HealthRoster.

§ The Defence business secured a multi-million pound contract for the Australian Defence Forces.

§ As separately announced today, the Company acquired RealTime Health Limited, a UK supplier of patient flow management software to the NHS for initial consideration of £1.2m.

 

 

Ian Bowles, Chief Executive Officer of Allocate, commented:

 

"2012 was our sixth consecutive year of record revenue and adjusted profits. This continuous improvement demonstrates a balance across markets and geographical territories, which supports our plans for significant growth in future years.  I am delighted with this year's performance and look forward to further success in the coming financial year."

 

Enquiries:

 

Allocate Software

Ian Bowles - Chief Executive Officer

Chris Gale - Chief Financial Officer

 

 

Tel: +44 (0) 20 7355 5555

Numis Securities

Nominated adviser - Michael Meade / Simon Willis / Richard Thomas

Corporate Broking - James Black

 

 

Tel: +44 (0) 20 7260 1000

Gable Communications

Justine James

John Bick

 

Tel: +44 (0) 20 7193 7463

Tel: +44 (0) 7525 324431

allocate@gablecommunications.com

 



CHAIRMAN'S STATEMENT

 

The 2012 financial year was a strong year for Allocate. We made two further acquisitions, begun the rollout of a major product upgrade cycle that will open new markets for us and we exceeded City expectations.

 

The Company was successful in all of its major markets in 2012.  The UK Healthcare business prospered driven by strong execution and the continuing productivity demands resulting from the NHS re-structuring process. The business in Australia continued to progress with the acquisition of RosterOn.  Time Care in Sweden again had a good year and the Defence team had their best ever year also securing their largest ever licencing contract in Australia.

 

The Company achieved substantial revenue and profit growth for the sixth year in succession. Our Company's balance sheet continues to be secure with another year of high profit to cash conversion. The financing of our acquisitions to date remains comfortably within our balance sheet's funding capacity.

 

Since the end of the financial year, we have continued our strategy of complementing our strong organic growth with carefully selected acquisitions. On 30 July 2012, we acquired RealTime Health Limited, a UK supplier of patient flow management software to the NHS. This is a vitally important application area and we expect the integration of RealTime Health with our existing product portfolio to provide significant operating and cost savings benefits for our customers. It will open up major new growth opportunities for our next strategic period.

 

I would like once more to thank our customers for their business and their partnership with Allocate and our Alliance partners for their continuing support. Finally, I would like to recognise and thank all of the Company's growing number of employees in all parts of the world, for another year of hard work and commitment in support of the Company's success.

 

As an indication of our confidence in the business, the directors are pleased to propose a dividend in respect of the full financial year of 1.2 pence per share, payable on 28 November 2012 to shareholders on the register on 2 November 2012.

 

I would like to thank Mark Loveland, who is stepping down from the board, for his seven years of exceptional service to our board and the Company.  We wish him well for the future, and a speedy return to full health.

 

We remain confident of our prospects for the 2013 financial year, and of the fundamental strength of the business.

 

 

Terry Osborne

CHAIRMAN

30 July 2012



CHIEF EXECUTIVE OFFICER'S STATEMENT

 

Overview

 

The 2012 financial year was another successful period for Allocate and we remain very positive about the future of the business. This year we completed two further acquisitions, we started the rollout of HealthRoster V10, we launched HealthRoster in the Cloud and we made progress in all of our territories and vertical market sectors.

 

Allocate has grown revenue and EBITDA by a CAGR of 35% and 41% respectively over the past five years. For a number of years, our growth was led predominantly by revenues earned from new NHS contracts, but over recent years we have driven a change in our business model and growth in recurring revenues is now a key driver.

 

As recently as 2009 for example, new licence revenue from NHS HealthRoster agreements represented approximately 43% of total revenue of £15.8m with recurring revenues being 21% of total revenue. In 2012 however, the new licence revenue from NHS customers is no more than 10% of total revenue of £36.6m, but with recurring revenues now representing 42% of total revenue.

 

This increase in recurring revenues, which is driven by cross sell from new products, both organically developed as well as acquired, has significantly improved the predictability of our revenue streams and the visibility of our profits and cash flows.

 

 

Business drivers and sources of growth

 

Overall, our value proposition to customers remains consistent. We offer customers superior applications and services that bring clear returns on investment (ROI) from operational efficiencies and reduced costs. In challenging economic times, demand for applications such as ours is stronger than at any other time in an economic cycle. Allocate solutions offer exactly what customers and prospective customers in our target markets need.

 

 

1.   Customer Satisfaction:

Is the number one priority for Allocate. We have invested considerably in people and infrastructure to support customer satisfaction over the past two years. We run regular surveys of CSAT, the results of which tell us that we are continuing to improve our service levels and that we have satisfied customers. Our renewal rates for support remain at or close to 100%.

 

2.   New Customers:

We will continue to seek and secure agreements with new customers in all sectors and all geographical territories believing there are significant opportunities for continued growth. In the UK, our success rate remains high, winning circa 80% of all bids that we enter.  In the UK almost one third of all NHS Trusts has yet to purchase an e-rostering system. Based on our prior performance and growing reputation, we are confident of securing a large number of these Trusts as new customers.

 

3.    New Products:

We continue to invest heavily in research and development (R&D) and have announced a raft of new application modules and services which broaden our applications portfolio in Healthcare beyond e-rostering. The new applications include Clinical Activity Management (CAM), HealthRoster in the Cloud and a National Benchmarking capability. We have also released the next generation of HealthRoster V10. This version of HealthRoster is of great importance to Allocate because it brings many new and important areas of functionality and enhanced performance that will open up new markets and opportunities, both in the UK and also overseas. Our business in Europe has already developed well through Time Care and now the launch of V10 will enable us to accelerate our entry into new territories. The Zircadian products, e-job plan and the Consultants portal are being integrated with the Allocate Medics application and we are now taking this unique solution to market.

 

4.   Business model:

Allocate continues to drive change in its business model towards one based upon recurring revenues. All new products developed or acquired will be offered on licencing models that are flexible and recurring to support the model. In addition, the NHS HealthRoster term licence renewal cycle has now begun. We have so far renewed 100% of the HealthRoster licences that have come up for renewal. We are confident that we will continue to secure a very high proportion of the future renewals.

 

5.   Acquisitions:

Acquisitions remain part of the growth strategy. We will continue to seek appropriately priced assets that will bring growth to the solution set that we offer to our customers. We now have a very significant customer base and cross sell opportunities are an important element of our growth. By way of example, we have now cross sold either an Allocate or a Zircadian product between 27 of the customers in the ten months since Zircadian were acquired.  RealTime Health, our most recent acquisition, once integrated into our applications portfolio, has the potential to drive revenues of a similar scale to e-rostering, with significant ROI for customers.

 

Healthcare - UK

 

2012 was a year of continued success in the Healthcare market led by further growth within the UK NHS, with the acquisition of Zircadian continuing the expansion of our Healthcare product portfolio into the medical staffing arena. The release of HealthRoster V10, our completely web based rostering product which enables Cloud based delivery and multi-lingual support, will enable us to target further growth opportunities.

 

We continued to grow our core NHS rostering market where the Company's success rate in competitive tenders of rostering solutions was very significant.  The strong position we now hold within the NHS means that we provide at least one software product to over 85% of NHS Trusts.  Ensuring that we continue to deliver proven benefits to our Healthcare customer base creates a significant on-going opportunity to deliver further products and secure additional revenue within the Healthcare market.  At our most recent User Group there were over 275 attendees from 100 NHS Trusts, as well as the independent sector, discussing the benefits they have achieved and sharing best practice.

 

The acquisition of Zircadian is a significant event in the development of our Healthcare solutions.  Firstly, we now have medical staff as part of the team; this greatly expands our product portfolio and experience in the management of the medical workforce.  Secondly, it broadens our solutions into the area of clinical and medical activity planning.  The integration of medical workforce planning managed within the Zircadian product set and operational rostering within HealthRoster offers enormous opportunities and benefits for our customers. This natural alignment of solutions has already led to additional sales within the customer base which would not have been realised otherwise. The significant benefit to customers, that being of increased ROI due to integration of the solutions, will also help drive further cross sell opportunities in the future.

 

Allocate also published the first in a series of thought leadership pieces aimed at NHS executive and specialist teams. The first paper titled "Junior Doctor Rota Review" has helped position Allocate as a thought leader and specialists in medical workforce management. It demonstrates that we are working with a number of Trusts to identify large scale savings by helping the reconfiguration of the medical workforce.

 

This year the integration of HealthRoster, Zircadian planning products and HealthAssure has created a Healthcare suite of products that moves Allocate into all areas of a Trust's operations spanning activity planning, workforce management, financial control and clinical governance/patient outcomes.  This aligns the Company to the current focus within Healthcare to deliver higher quality care within an increasingly constrained financial regime.

 

Allocate also initiated an Executive Advisory Council that will meet three to four times a year to collaborate with and advise Allocate on market changes and healthcare challenges. The Advisory Council is made up of a broad range of executives from the NHS and will provide a forum to test ideas and explore value and innovation of future strategy and market engagement. The forum will keep Allocate aligned to the issues affecting executives and their organisations. The forum will also be publishing white papers based on agreed topic areas affecting the healthcare market place.

 

The successful release of our flagship rostering product HealthRoster V10 within a completely re-architected framework was also achieved.  V10 is simpler, faster and more accessible than all of its predecessors.  HealthRoster V10 is web based, offering the ability to deliver via the Cloud, reducing the time to deploy and allowing ease of purchase for our customers.   In addition, the ability of V10 to support multiple languages will accelerate our sales into non-English speaking countries. 

 

Healthcare - Overseas

 

Overseas, we achieved significant success in a number of areas:  

 

RosterOn, our acquisition in Australia has had a challenging year post acquisition. However, we have already integrated their awards engine technology with the Allocate HealthRoster product and this integrated solution is already being favourably received by the market.

 

Time Care had another successful year. The political situation in Sweden is changing and many Swedish municipalities now have to offer their employees the right to full time employment. This we believe will lead to an on-going demand for our consultancy services in that field. The localisation of HealthRoster V10 is most important and it will be given high priority. The response has been very positive from the clients who have been introduced to the software. We have great expectations from the Swedish private sector and there is a strong trend among customers and prospects to improve their workforce management.

 

Time Care has also signed an important agreement with Aditro, the leading Scandinavian based provider of solutions for human resources management. This partnership will provide us with the opportunity to access their customer base containing some 12,000 customers in Sweden, Norway, Finland and Denmark, in both public and private sectors. The partnership with Aditro includes not only sales and marketing elements but also development of an interface between their products and ours.

 

The Company's achievement in securing the country wide HealthRoster contract in Brunei further reinforces our presence in overseas markets.  The securing of this contract has led to several partner opportunities arising which alongside V10 position the Company to expand into other territories.

 

Allocate currently work with over 350 healthcare organisations in 11 countries.  Our strong presence within the Healthcare market offers the opportunity to build upon our significant position, expanding our revenue via new customers and cross sales of new solutions to deliver continued growth.  Our strategy is to position Allocate as a solution provider to healthcare organisations that is integral to their operations from activity planning, operational management through to the measurement of patient outcomes.

 

Defence

 

The Defence sector had a record year, delivering revenues of £7.6m (2011: £4.1m).

 

The principal accomplishments include:

 

§ Securing a multi-million pound licence contract with the Australian Defence Forces extending the use of Defence Suite across Army, Navy and civilians under military control;

§ Substantial additional services contract extension wins with the Royal Australian Navy, as part of their New Generation Navy programme;

§ Two new services contract wins in NATO within their Force Operations Group and Special Forces HQ; and

§ The extension of the UK Army contract to 2014.

 

Research & Development

 

Our continued investment in R&D has resulted in the release of HealthRoster V10, our Cloud Offering as well as enhanced versions of HealthAssure and the integration of core applications with the acquired applications from both Zircadian and RosterOn.

 

Over the next period we will see further integration of applications and the delivery of new modules such as Clinical Activity Management and further enhancements to our Cloud based applications portfolio.

 

All of our software and services offerings are designed and developed in close cooperation with our customers to ensure they meet current and future needs.

 

Organisation

 

The continued success of Allocate depends on our people; their ideas, commitment and energy drive our continuing success.

 

We have now grown to over 300 employees from 103 four years ago. We also have over 20% of our employees located overseas in Sweden, Australia, America and Malaysia.

 

We are embarking upon a number of programmes to help our employees grow with Allocate, to maintain their focus and to support the realisation of the Company's objectives through their individual achievements.

 

We run an annual employee survey, which this year showed very positive employee satisfaction ratings. We are increasing our investment in employee training, both functional and management, we are improving our benefits packages with the help of a newly appointed supplier.  We are increasing the number of promotion/rotational opportunities available to employees, both in the UK and overseas.

 

 

Financial report

 

Revenue in the financial year was £36.6m (2011: £30.1m), an increase over the prior year of 22%. EBITDA was £6.4m (2011: £5.8m), an increase over the prior year of 10%. The resulting trading profit margin was 17.5% (2011: 19.3%), a slight contraction over the previous year due to increased levels of investment in the business, particularly R&D.  Diluted adjusted EPS (excluding amortisation of intangibles, impairment, share-based payments, acquisition costs and the deferred tax adjustment) increased by 16% to 7.4p (2011: 6.4p).

 

Recurring revenues grew by 36% to £15.6m or 42% of total revenue (2011: £11.5m or 38% of total revenue).

 

Organic revenue (excluding the acquisitions of RosterOn and Zircadian which were both acquired part way through 2012) grew by 10% to £33.0m (2011: £30.1m) during the year.

 

Licence and subscription revenue grew by 16% to £15.4m (2011: £13.3m).

 

By sector, Healthcare revenue in the period increased by 13% to £26.2m (2011: £23.1m), reflecting the impact of acquisitions as well as the growth of recurring revenues.  Defence revenues rose by 85% to £7.6m (2011: £4.1m), principally due to the large order from the Australian Defence Force secured in the second half of 2012.  Maritime and all other revenue remained flat at £2.9m (2011: £2.9m).

 

EBITDA margins were 17.5% (2011: 19.3%) as a result of an increase in investments made during the year. The principal area for increase in investment has been in R&D, which in 2012 was £6.8m or 19% of revenue (2011: £4.6m or 15% of revenue). The main areas for the increase in spending were into V10 HealthRoster and also spend supporting the move towards more Cloud based solutions, both organic and acquired. Spend in R&D is expected to increase in the future, although not at the level seen recently.

 

As previously stated, the performance of the Dynamic Change business has continued to be below management's expectations in this period.  This is due to the negative impact of the restructuring of PCTs, proposed and begun by the government in the summer of 2011.  A significant proportion of Dynamic Change's customers were commissioning PCTs, some 37%, many of whom cannot renew their subscriptions because they no longer exist as organisations and their replacements have yet to be established.  However, over the last 12 months, the Company has seen some improvement in the number of new customers being contracted, but not sufficient to offset those not renewing.  As a result, management have revised downwards their forecasts for both revenue and profits from Dynamic Change and, in accordance with the provisions of IAS36, they have impaired the assets of the business. As reported in the interim financial report, this has resulted in a write down of intangible assets and goodwill through an impairment charge of £3.9m to the Income Statement.

 

As previously stated, we propose to pay a dividend in respect of the full financial year of 1.2 pence per share, payable on 28 November 2012 to shareholders on the register on 2 November 2012.

 

Cash generated from operations was £5.4m in 2012, (2011: £5.9m). This is a conversion rate of 84% of EBITDA, a strong performance although slightly lower than in 2011, but only as a result of the late payment of a material sum from a single customer that arrived during the first week following the year end.

 

Net cash on the Balance Sheet was £4.3m, consisting of gross cash of £8.3m and debt of £4.0m. Net cash, gross cash and debt at the end of 2011 were, respectively, £8.4m, £10.4m and £2.0m.

 

 

Outlook

 

The outlook for Allocate Software is positive and I am confident our growth will continue.

 

By working in close cooperation with our customers we will continue to anticipate demand for new solutions that will support their objectives and deliver superior ROI. Our solutions are perfectly suited to the economic challenges currently faced by our customers. Our products have shown on numerous occasions that they bring significant cost reductions and improvements in workforce efficiency.

 

The breadth and depth of our applications portfolio which now includes a Cloud offering for all of the core applications in healthcare, as well as our ability to localise HealthRoster into any language will create new and exciting opportunities, for the Company and our customers.

 

RealTime Health, our most recent acquisition, will enable our Healthcare customers to drive further efficiencies as we combine Clinical Activity Management, Staff Deployment and patient flow capabilities into an integrated, holistic solution.

 

Our track record of the past six years vindicates our belief that we are uniquely equipped to help our current and prospective customers achieve their objectives.  We offer proven products that deliver significant improvements in efficiency and demonstrable ROI.

 

Allocate is now a substantial enterprise with an enviable track record of customer acquisition, market development and new product realisation.

 

I would like to add my own thanks to our team, partners and especially our customers for their on-going support.

 

Ian Bowles

CHIEF EXECUTIVE OFFICER

30 July 2012

 

 

ALLOCATE SOFTWARE PLC

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MAY 2012





2012

2011

 





£'000

£'000

 







 







 

Licence revenue




10,413

10,177

 

Subscription revenue




4,993

3,169

 





15,406

13,346

 

Support revenue




10,121

8,067

 

Service revenue




10,620

8,387

 

Other revenue




502

313

 

Total revenue




36,649

30,113

 







 

Costs of goods sold




(11,069)

(9,180)

 

Research and development




(6,789)

(4,558)

 

Sales, general and administration




(12,394)

(10,537)

 

Total costs before interest, tax, depreciation, amortisation, share based payments and acquisition costs




(30,252)

(24,275)

 







 

EBITDA before share based payments and acquisition costs




6,397

5,838

 







 

Acquisition costs




(1,754)

(64)

 

Share based payments




(477)

(150)

 

Depreciation




(395)

(331)

 

Amortisation




(4,538)

(4,427)

 

Impairment




(3,935)

-

 

Total costs




(41,351)

(29,247)

 







 

Operating (loss)/profit




(4,702)

866

 







 

Finance income




108

49

 

Foreign exchange gains/(losses)




231

(140)

 

Finance charges




(123)

(28)

 







 

Net finance income/(expense)




216

(119)

 







 

(Loss)/profit for the year before taxation




(4,486)

747

 







 

Tax on (loss)/profit for the year




1,089

50

 







 

(Loss)/profit for the year




(3,397)

797

 







 







 

(Loss)/earnings per share






 

Basic (pence per share)




(5.35p)

1.28p

Diluted (pence per share)




(5.35p)

1.24p







 



 

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MAY 2012

 




2012

2011

 




£'000

£'000

 






 













(Loss)/profit per the income statement




(3,397)

797







Exchange differences on translation of foreign operations




(951)

1,165













Total comprehensive (loss) / income attributable to the owners of the company




(4,348)

1,962







 



 

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2012









2012

2011




£'000

£'000






Non-current assets





Property, plant and equipment



908

763

Goodwill



6,939

2,935

Intangible assets



9,661

12,960

Other financial assets



60

66

Deferred tax asset



561

1,030






Total non-current assets



18,129

17,754






Current assets





Corporation tax receivable



120

52

Trade and other receivables



14,838

10,632

Cash and cash equivalents



8,338

10,398






Total current assets



23,296

21,082






Total assets



41,425

38,836






Equity and liabilities





Equity





Share capital



3,192

3,154

Share premium account



7,908

7,752

Share-based payment reserve



1,035

694

Foreign exchange reserve



367

1,318

Retained earnings



3,258

6,655






Total equity



15,760

19,573






Non-current liabilities





Borrowings



4,000

-

Deferred tax liability



2,129

3,012






Total non-current liabilities



6,129

3,012






Current liabilities





Trade and other payables



18,895

14,062

Borrowings



-

2,000

Corporation tax



641

189






Total current liabilities



19,536

16,251






Total liabilities



25,665

19,263






Total equity and liabilities



41,425

38,836













 

ALLOCATE SOFTWARE PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 May 2012

 


Share capital

Share premium

Share-based payment  reserve

Foreign exchange reserve

Retained earnings

Total

equity


£'000

£'000

£'000

£'000

£'000

£'000








At 1 June 2010

3,060

7,380

408

153

5,858

16,859








Equity settled share options

94

372

150

-

-

616

Deferred tax on share options

-

-

136

-

-

136








Total transactions with owners

94

372

286

-

-

752








Profit for the year

-

-

-

-

797

797

Other comprehensive income

-

-

-

1,165

-

1,165






Total comprehensive income

-

-

-

1,165

797

1,962















At 31 May 2011

3,154

7,752

694

1,318

6,655

19,573








Equity settled share options

38

156

477

-

-

671

Deferred tax on share options

-

-

(136)

-

-

(136)








Total transactions with owners

38

156

341

-

-

535








Loss for the year

-

-

-

-

(3,397)

(3,397)

Other comprehensive (loss)/income

-

-

-

(951)

-

(951)






Total comprehensive (loss)/income

-

-

-

(951)

(3,397)

(4,348)















At 31 May 2012

3,192

7,908

1,035

367

3,258

15,760






 



ALLOCATE SOFTWARE PLC

CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 May 2012

 






 

 




 

 


2012

2011




£'000

£'000






Cash flow from operating activities





(Loss)/profit for the year



(3,397)

797

Adjustments for:





Net finance charge/(income)



15

(21)

Foreign exchange



(231)

140

Income tax



(1,089)

(50)

Loss/(profit) on disposal of intangible assets



12

(11)

Depreciation



395

331

Acquisition and related costs



1,754

64

Amortisation



4,538

4,427

Impairment of intangibles and goodwill



3,935

-

Share-based payment



477

150

Increase in trade and other receivables



(2,628)

(1,625)

Increase in trade and other payables



1,604

1,713






Net cash generated from operations before acquisition and related costs



5,385

5,915

Acquisition and related costs



(1,544)

(64)

Net cash generated from operations after acquisition and related costs



3,841

5,851

Interest expense



(123)

(28)

Income tax



(301)

(14)






Net cash generated by operating activities



3,417

5,809






Cash flows from investing activities





Interest received



108

49

Deferred consideration on prior acquisitions



-

(250)

Investment to acquire subsidiaries



(8,664)

-

Cash acquired with subsidiaries



1,843

-

Proceeds from disposal of intangible assets



50

181

Payments to acquire intangible assets



(268)

(368)

Payments for property, plant and equipment



(485)

(324)






Net cash used in investing activities



(7,416)

(712)






Cash flows from financing activities





Repayment of borrowings



-

(172)

Proceeds from loan



2,000

-

Proceeds from the issue of equity shares



194

466






Net cash generated by financing activities



2,194

294






Net (decrease)/increase in cash and cash equivalents



(1,805)

5,391

Foreign exchange differences



(255)

(35)

Cash and cash equivalents at the start of the year



10,398

5,042






Cash and cash equivalents at the end of the year



8,338

10,398






 



 

ALLOCATE SOFTWARE PLC

NOTES TO THE FINANCIAL INFORMATION

 

1.         Publication of Non-Statutory Accounts

 

The financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated cash flow statement and related notes, does not constitute full accounts within the meaning of s435 of the Companies Act 2006.

 

The auditors have reported on the Group's statutory accounts for the year ended 31 May 2012 under s495 of the Companies Act 2006.  The auditor's report does not contain statements under s498(2) or s498(3) of the Companies Act 2006 and is unqualified.  The statutory accounts for the year ended 31 May 2012 will be filed with the Registrar of Companies, sent to shareholders and published on the Company's website at www.allocatesoftware.com in due course.

 

 

2.         Basis of Preparation

 

The Group's accounting policies are consistent with those applied in the year to 31 May 2011, amended to reflect any new standards. The adoption of new standards in the year has not resulted in a significant impact to the Group's accounting policies.

 

 

3.         Segmental Reporting

 

Management has determined the operating segments based on the revenue streams within the reports reviewed by the strategic decision maker comprising the board of Directors.  These segments are consistent with how the business is structured, managed and its resources are deployed by the board.

 

Licence and subscription revenue represents revenue from the sale of non-cancellable software licence agreements and subscriptions associated with that software. Support and service revenue represents revenue from the provision of installation, consulting, training and product support.

2012

Licence



Subscriptions



Support

 

 

Services

 

Hosting / Other

Total


£'000

£'000

£'000

£'000

£'000

£'000








Revenue

10,413

4,993

10,121

10,620

502

36,649

Costs of goods sold

(827)

(910)

(2,049)

(6,915)

(368)

(11,069)








Sub-total

9,586

4,083

8,072

3,705

134

25,580








Research and development costs






(6,789)

Sales, general and administration (*)





(23,493)








Operating loss






(4,702)








Finance income






108

Foreign exchange gains






231

Finance charges






(123)








Loss before tax






(4,486)

 



 

 

2011

Licence



Subscriptions



Support

 

 

Services

 

Hosting / Other

Total


£'000

£'000

£'000

£'000

£'000

£'000








Revenue

10,177

3,169

8,067

8,387

313

30,113

Costs of goods sold

(480)

(476)

(1,644)

(6,246)

(334)

(9,180)








Sub-total

9,697

2,693

6,423

2,141

(21)

20,933








Research and development costs






(4,558)

Sales, general and administration (*)





(15,509)








Operating profit






866








Finance income






49

Foreign exchange losses






(140)

Finance charges






(28)








Profit before tax






747

 

 

(*)  includes acquisition costs, amortisation, impairment of intangible assets and share-based payment charges.

 

Under IFRS 8 there is a requirement to show operating profit and total assets for the operating segments, however, attributable expenses and total assets cannot be allocated on a reasonable basis and, as a result, the analysis is limited to the group revenue less costs of goods sold which is then reconciled to the profit before tax.  

 

There are no material intersegment revenues.

 

Revenues from external customers in the Group's domicile, the United Kingdom, as well as its major markets, the European Union and the USA, have been identified on the basis of the customer's geographical location.  Non-current assets are allocated based on their physical location.

 

Revenue arises from customers in the following locations:

 

2012

2011


£'000

£'000




UK

17,978

15,064

Europe

7,829

7,345

USA

1,149

1,174

Australia

9,284

6,187

Rest of World

409

343





36,649

30,113

 



 

In addition to the requirements of IFRS 8, the directors present a schedule of revenue analysed by vertical business sector:

 


2011

2011


£'000

£'000




Healthcare

26,162

23,101

Defence

7,615

4,112

Maritime

2,111

1,681

Other

761

1,219





36,649

30,113

 

There was 1 customer (2011: 1) who contributed in excess of 10% of total revenues. Their aggregate contribution to revenue amounted to 15% (2011:14%) of revenue.

 

The internal reporting of the Group's performance does not require that statement of financial position information is gathered on the basis of the business streams 'Licences', 'Subscriptions', 'Services' and 'Other' reported above.  This information is therefore not accessible and, as a result, the segmental analysis does not include statement of financial position details.  However, the group operates within discrete geographical markets and the non-current assets of the group are split between these locations:

 

Non-current assets by location

UK

Europe

USA

 

Australia

R o W

Total

2012

£'000

£'000

£'000

£'000

£'000

£'000








Intangible assets

5,633

3,209

-

819

-

9,661

Goodwill

3,946

2,168

-

825

-

6,939

Financial assets

-

60

-

-

-

60

Property, plant and equipment

778

83

10

35

2

908

Deferred tax assets

561

-

-

-

-

561








Total non-current assets

10,918

5,520

10

1,679

2

18,129








 

 

 

Non-current assets by location

UK

Europe

USA

 

Australia

R o W

Total

2011

£'000

£'000

£'000

£'000

£'000

£'000








Intangible assets

6,919

6,041

-

-

-

12,960

Goodwill

540

2,395

-

-

-

2,935

Financial assets

-

66

-

-

-

66

Property, plant and equipment

639

112

4

4

4

763

Deferred tax assets

1,030

-

-

-

-

1,030








Total non-current assets

9,128

8,614

4

4

4

17,754

 

 

4.         Income Tax (Credit) / Expense

 


2012

2011


£'000

£'000

Current tax:



Corporation tax on (loss)/profit for the year

-

-

Prior period adjustments

(184)

(132)

Overseas tax

813

487




Total current tax

629

355




Deferred tax:



Origination and reversal of temporary differences :



Current period

(1,716)

(340)

Prior period adjustments

97

124

Rate change adjustment

(99)

(189)




Total deferred tax

(1,718)

(405)




Tax on (loss)/profit for the year

(1,089)

(50)




 

The rate change adjustment in the year arises due to a reduction in the UK rate of corporation tax from 26% to 24%.

 

Amounts recognised directly in equity

Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity:

 


2012

2010


£'000

£'000




Net deferred tax - (credited)/charged to equity

(136)

136





(136)

136

 

 

The tax assessed for the year differs from the standard rate of corporation tax as applied in the respective trading domains where the group operates. The differences are explained below:

 


2012

2011


£'000

£'000




(Loss)/profit for the year before tax

(4,486)

747




(Loss)/profit for year multiplied by the respective standard rate of corporation tax applicable in each domain 25.67% (2011: 27.66%).

 

(1,152)

 

207




Effects of:



Tax rate change adjustment

(99)

(280)

Adjustment to tax in respect of prior periods

(87)

(9)

Difference in overseas tax rates

11

(25)

Movement on deferred tax not recognised

(36)

65

Research and development enhanced relief

(511)

(242)

Share based payments

-

(212)

Other timing differences

(20)

388

Uncertain tax positions

189

-

Expenses not deductible for tax purposes



-       Acquisition costs

429

-

-       Impairment of goodwill

139

-

-       Other

48

58




Tax on (loss)/profit for the year

(1,089)

(50)

 

 

5.         Earnings per share


31 May

31 May


2012

2011


£'000

£'000




(Loss)/profit for the year attributable to shareholders

(3,397)

797




(Loss)/earnings per share



Basic (pence per share)

(5.35p)

1.28p

Diluted (pence per share)

(5.35p)

1.24p




Weighted average number of shares

Number

of shares

Number

of shares




Shares in issue at opening

63,074,353

61,195,314

Shares issued during the year

766,900

1,879,039




Shares in issue at closing

63,841,253

63,074,353




Weighted average shares for basic earnings per share

63,409,261

62,364,597

Effect of dilutive potential ordinary shares

1,671,842

2,088,799




Weighted average shares for diluted earnings per share

65,081,103

64,453,396




 

 

Adjusted earnings per ordinary share

An adjusted earnings per share has been calculated in addition to the post tax earnings per share which eliminates the effects of share-based payment, impairment and amortisation of intangibles, acquisition costs and the deferred tax adjustment. It has been calculated to allow shareholders to gain a clearer understanding of the trading performance of the group. The basis of the calculation of the basic and adjusted profit per share is set out below:


2012

2011


£'000

£'000




(Loss)/profit for the year attributable to shareholders

(3,397)

797

Amortisation of intangibles

4,538

4,427

Impairment charge

3,935

-

Share-based payments

477

150

Acquisition costs

1,754

64

Tax on amortisation, share-based payment and acquisition costs

(2,480)

(1,283)




Adjusted profit for the year attributable to shareholders

4,827

4,155




Basic adjusted earnings per share

7.60p

6.66p

Diluted adjusted earnings per share

7.42p

6.44p

 

 

6.         Business Combinations

 

Acquisitions have been accounted for by the purchase method of accounting. The goodwill arising on these acquisitions is subject to annual impairment review. The following tables set out the book values of the identifiable assets and liabilities acquired during the year ended 31 May 2012 and their fair values:

 

RosterOn Pty Ltd

 

On 4 July 2011 the Group acquired 100% of the share capital of RosterOn Pty Ltd, an Australian based provider of workforce management software with a focus on the Australian healthcare market. The consideration for the acquisition was £2,209,000 (A$3,358,000) which was paid in cash during the year including a payment for the net asset value of the company of £496,000 (A$758,000). The net assets acquired included cash of £586,000 (A$890,000).

 

The net assets acquired and the resultant fair value adjustments are shown below:










Book value

Provisional fair value adjustment

Fair value

 




£'000

£'000

£'000

 







 

Cash


586

-

586

 

Intangibles


-

1,054

1,054

 

Property, plant and equipment


21

-

21

 

Receivables


588

-

588

 

Trade payables and other payables


(607)

-

(607)

 

Deferred tax liability



(32)

(264)

(296)

 

Net assets



556

790

1,346

 





 

Goodwill arising on acquisition

-

863

863

 

Total purchase consideration



2,209

 







 

Purchase consideration:






 

Cash





2,209

 







 

Analysis of cash flows on acquisition:





 

Purchase consideration



2,209

 

Net cash acquired with the subsidiary (included in cash flows from investing activities)



(586)

 

Net cash flow on acquisition





1,623

 





 

Transaction costs of the acquisition (included in cash flows from operating activities)



292

 

 

In addition to the £2,209,000 purchase consideration, a further £264,000 (A$400,000) is payable 18 months after the acquisition contingent on key staff retentions.  For accounting purposes, IFRS 3 'Business Combinations' requires this to be treated as remuneration and not consideration. Consequently this does not form part of the cost of acquisition and instead will be expensed to the Income Statement on a straight line basis over the 18 month period between the date of acquisition and the payment date.  This charge is included within the 'Acquisition & related costs' line of the Income Statement.

 

The goodwill of £863,000 comprises certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include the expected value of synergies and an assembled workforce. Goodwill is allocated entirely to the RosterOn cash generating unit. None of the goodwill is expected to be deductible for income tax purposes.

 

In the period since acquisition, RosterOn Pty Ltd contributed revenues of £1,291,000 and a profit after tax of £46,000 to the group for the period from 5 July 2011 to 31 May 2012.  If the acquisition had occurred on 1 June 2011, the Group's annualised consolidated revenue and loss after tax for the year ended 30 June 2012  would have been £36,766,000 and £3,440,000 respectively.  This includes not only an estimate of the full year contribution of RosterOn but also the impact of a full year of amortisation charge (after tax) of the intangible assets which arose on the acquisition.

 

 

Zircadian Holdings Limited

 

On 12 August 2011 the group acquired 100% of the share capital of Zircadian Holdings Limited, a UK based Software-as-a-Service ("SaaS") provider of software used to plan rotas of junior doctors and consultants in the NHS. The consideration for the acquisition was £6,455,000, all payable in cash. £6,455,000 was paid during the year, including a deferred consideration payment of up £1,000,000 paid in April 2012 which had been contingent on financial targets being met. This acquisition was funded in part through a renewal of the Group's revolving facility for a further two years and an increase in this by £2,000,000 to £4,000,000.  The net assets acquired included cash of £1,257,000.

 



 

The net assets acquired and the resultant fair value adjustments are shown below:

 

 

 

 

 

 

 




Book value

Provisional fair value adjustment

Fair value

 




£'000

£'000

£'000

 







 

Cash



1,257

-

1,257

 

Intangibles - acquired



27

-

27

 

Intangibles - identified at acquisition


-

3,941

3,941

 

Property, plant and equipment



39

-

39

 

Receivables



620

-

620

 

Trade payables and other payables


(368)

-

(368)

 

Deferred income



(2,013)

-

(2,013)

 

Deferred tax liability



(9)

(985)

(994)

 

Net (liabilities)/assets



(447)

2,956

2,509

 





 

Goodwill arising on acquisition

-

3,946

3,946

 

Total purchase consideration





6,455

 

Purchase consideration:  






 

Cash paid on completion





5,455

 

Contingent consideration





1,000

 

Total consideration





6,455

 

Payments treated as remuneration





500

 

Acquisition costs





725

 

Total cost of investment





7,680

 







 

Analysis of cash flows on acquisition:





 

Purchase consideration



6,455

 

Net cash acquired with the subsidiary (included in cash flows from investing activities)



(1,257)

 

Net cash flow on acquisition





5,198

 





 

Transaction costs of the acquisition (included in cash flows from operating activities)



1,225

 

 

 

In addition to the purchase consideration of £6,455,000, a further £500,000 payment was made during the year in respect of key staff retentions for a period of six months post acquisition.  As for the RosterOn acquisition, IFRS 3 requires this amount to be treated as remuneration and not consideration. Consequently this does not form part of the cost of acquisition and was instead expensed to the Income Statement over the six month period between the date of acquisition and the payment date. This charge is included within the 'Acquisition & related costs' line of the Income Statement.

 

 

The goodwill of £3,946,000 comprises certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include the expected value of synergies and an assembled workforce. Goodwill is allocated entirely to the Zircadian cash generating unit. None of the goodwill is expected to be deductible for income tax purposes.

 

In the period since acquisition, Zircadian Holdings Limited contributed revenues of £2,330,000 and a profit after tax of £167,000 to the group for the period from 11 August 2011 to 31 May 2012.  If the acquisition had occurred on 1 June 2011, the Group's annualised revenue and loss after tax would have been £37,262,000 and £3,478,000 respectively.  This includes not only an estimate of the full year contribution of Zircadian but also the impact of a full year of amortisation charge (after tax) of the intangible assets which arose on acquisition. 

 

7.         Directors' Remuneration

 

 

Group

2012

2011


£'000

£'000




Short term employee benefits

1,179

1,141

Post-employment benefits

58

28

Remuneration benefits

3

3

Share-based payments

193

111





1,433

1,283

 

 

 

8.         Events after the Statement of Financial Position Date

 

 

On 30 July 2012 the Group acquired 100% of the share capital of RealTime Health Limited, a UK supplier of patient flow management software to the NHS.  The maximum total consideration, based on zero net assets, of up to £7,200,000 is structured as an initial payment of £1,200,000 and an earn-out of up to £6,000,000 in tranches. The initial consideration comprises a cash payment of £1,200,000 paid from existing cash resources. Deferred consideration of up to £6,000,000 in cash is contingent upon the meeting of conditions, including achieving a number of demanding billings targets, during the 24 months following acquisition.  Included within acquisition costs in the Income Statement is £76,000 incurred prior to 31 May in relation to the acquisition of RealTime Health.

 

As at the date of approval of the financial statements, the initial accounting has not been completed for this business combination.  Consequently it has not been possible to disclose the following information required by IFRS 'Business Combinations': a description of the goodwill arising; the fair values of assets and liabilities acquired; details of contingent liabilities (if any); total goodwill deductible for tax purposes; and transactions recognised separately from the acquisition of assets and assumption of liabilities in the business combination.

 


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